Carbon360° Research, a member of the Opalesque Group, has launched its 2009 Fund Administrator Fact

Added: (Mon Oct 26 2009)

Pressbox (Press Release) - In this press release, Carbon360° Research (www.carbon360.com) is exclusively sharing some of the relevant findings.

Carbon360° Research determines fund administration industry experienced -26% drop in assets under management. Largest asset losses stem from single manager hedge fund clients which fell to $2.49tln (a loss of 26.1%), followed by fund of hedge funds which dropped by $411 Billion (a loss of 29.6%). With 500+ page in-depth industry analysis of 150 administrators, the newly released Carbon360° Fund Administrator Fact Book is the most comprehensive study available on third party fund administrators.

* Transparency demands drive 3rd party administrator use as ‘best practice’
* Administration charges of single strategy hedge funds drop to 7.78bps on average, fund of funds charges to 6.5bps
* Profit margins narrowed to 16.9%, contributing to a total industry income decline of -27% YOY.
* Administrators reduced headcount by 20% as a result
* Positive outlook through reduced redemptions and increased start-up activities and asset inflows

New York/ October 23, 2009/: Carbon360° Research (Carbon360°), a leading provider of technology and operations research for the institutional investment community, is releasing its fourth annual “Carbon 360° Fund Administrator Service Provider Fact Book” today. The 2009 Fact Book is a comprehensive, 500+ page in-depth industry analysis of 150 administrators (market breakdown, growth, revenues, costs, and profit) and identifies trends in the fund administration space.

Assets under administration greatly diminished
The Carbon360° research illustrates the staggering asset losses suffered across the alternatives industry. Combined alternative assets under administration (covering hedge funds, fund of funds, and private equity) have fallen to $4.48tln. Single manager hedge fund AUM dropped the largest amount on record, falling 26.1% to $2.49tln and fund of funds asset levels dropped 29.6% to $977bn.

The Cayman Islands Monetary Authority (CIMA) announced - for the first time in a decade - a decrease in the number of hedge funds registered within its jurisdiction. CIMA registered funds dropped from 9,378 to 9,189.

Transparency demands driving 3rd party administrator use as ‘best practice’
In 2007, Carbon360° predicted that the global credit crunch was the perfect storm engulfing the fund administration industry. While assets under administration have been greatly diminished, certain drivers of the financial crisis have actually strengthened the administration industry’s presence and bode well for its participation in the industry’s recovery going forward.

“Fund managers came under fire from investors who became increasingly interested in the verification, valuation, and exposure of their assets," commented Daniel Golyanov, lead Research Analyst at Carbon360. "In theory Administrators are well positioned to alleviate investor concerns with a range of existing services, however their ability to extend more comprehensive portfolio analytic and risk measurement solutions to both managers and investors alike remains a challenge."

The investor-driven demand for greater transparency has taken hold quickly and firmly, and continues to become a “best practice” across the industry. 2009 saw several multi-billion dollar, self-administered funds (ie DE Shaw Group, Caxton, Elliot Management, etc) buckle to mounting investor pressure and contract with third party administrators.

Within this trend Carbon360° has found that large funds turning to third party administrators are overwhelmingly contracting with large, established firms to gain the benefit of brand recognition. However, most are utilizing the third party administrators as shadow platforms and opting for month-end services rather than daily services as they retain and integrate proprietary platforms.

Challenges for administrators
Administrator success is tied directly to the asset levels and performance returns of its clients. Due to asset level drops as well as managers cutting costs by opting out of full services for month-end only service, administration charges of single strategy hedge funds have dropped to an average of 7.78bps (down 5% YOY) and average fund of funds charges have dropped to 6.5bps.

While progression through 2009 has seen capital bases slowly increase (due to both strong performance and increased allocations), redemptions ease, and fewer funds close, a prolonged recovery back to asset level high points will take its toll on administrators.

Additionally, competition is fierce for securing the assets of hedge funds looking to third party administrators for the first time, or the assets of funds that launch into the recovery, and many administrators have had to increase operational offerings at a cost.

These circumstances have translated into a steep contraction in profit margins, which narrowed to 16.9%, which contributed to a total industry income decline of -27% YOY. As a result administrators have reduced headcount by 20%.

Administrator industry’s outlook for market direction
Given the fact that fund administrators do possess a high degree of visibility into not only manager, but investor activity, Carbon360° asked survey participants to respond to two questions regarding market directions as per what trends they are seeing amongst managers and investors.

* 66.7% of fund administrators see fund closures decreasing or holding at present levels
* 75% of fund administrators see fund start ups increasing or holding at present levels
* 78.3% of fund administrators see investor subscriptions increasing

Fund administrators also identified that closures are increasing amongst the smaller and weaker players, the “safe” names are increasing their dominance within the industry and across the board cost cutting measures are still increasing.

About Carbon360° Research
Carbon 360 Research is a leading provider of technology and operations research for the institutional investment community and is the publisher of the annual "Fund Administration Fact Book", a comprehensive report on the global fund administration industry. The company was founded in 1997 and is headquartered in New York City.

Carbon provides financial institutions with the comprehensive information necessary to evaluate the competitive supply market in software development, information and operating systems.

Carbon provides clients with qualitative and quantitative analysis of vendors available through in-depth product guides, vendor profiles, vendor comparisons, user surveys, and analysis of industry trends.

Website: https://www.carbon360.com/viewAbstract.do?documentID=7225

For more information please contact:
Daniel Golyanov, Research Analyst
www.carbon360.com
email: dgolyanov@carbon360.com
phone: +1-646-432-3331